Subprime Rates

DEFINITION of 'Subprime Rates'

Interest rates charged to subprime borrowers, such as on loans to people with poor credit scores from one or more credit bureau. Subprime rates will be higher than prime rates for the same type of loan, although there is no exact amount or spread that constitutes subprime.

BREAKING DOWN 'Subprime Rates'

Factors that affect subprime rates include the size of the loan, the income of the individual, the number of delinquent accounts on the borrower's credit report and the amount of the down payment for a given loan.

Subprime lenders use what is called "risk-based pricing" to determine how much interest to charge on a given loan or class of borrower. This pricing method may change as economic conditions change in the broad financial markets.